Scott Brown is an Associate Professor of Finance at the Graduate School of Business Administration, University of Puerto Rico, Rio Piedras Campus in San Juan, PR. He is also at University of South Carolina, 1705 College Street, Columbia, SC. José J. Cao Alvira is an Associate Professor of Finance at the Graduate School of Business Administration, University of Puerto Rico, Rio Piedras Campus in San Juan, PR and a Research Associate at the Business School of the Universidad Sergio Arboleda in Bogota, Colombia. Eric Powers is an Associate Professor of Finance at the Moore School of Business, University of South Carolina in Columbia, SC.
Do Investment Newsletters Move Markets?
Article first published online: 22 JAN 2013
© 2013 Financial Management Association International
Volume 42, Issue 2, pages 315–338, Summer 2013
How to Cite
Brown, S., Cao-Alvira, J. J. and Powers, E. (2013), Do Investment Newsletters Move Markets?. Financial Management, 42: 315–338. doi: 10.1111/fima.12004
We thank seminar participants at the University of South Carolina, the 2010 Financial Management Association Conference, the 2010 Southern Finance Association Conference, D.H. Zhang, and several anonymous referees for helpful comments.
- Issue published online: 28 MAY 2013
- Article first published online: 22 JAN 2013
We analyze the market impact of stock recommendations made by a single investment newsletter that focuses on instances of heavy insider trading. The market reacts positively to the actual insider trades and the associated Form 4 Securities and Exchange Commission (SEC) filings that attracted the newsletter's interest. The subsequent recommendations, which occur within a delay of several days, are associated with an even larger announcement period return and higher trade volume. Thus, despite the fact that recommendations are largely based on publicly available information on insider trades and the reach of the newsletter is limited, the newsletter has a significant impact on the market.